CocaCola Company 2007

Company Background
The Coca-Cola Company manufactures, distributes and markets nonalcoholic beverage concentrates and syrups. Coca-Cola owns or licenses more than 400 brands, including diet and light beverages, waters, juice and juice drinks, teas, coffees, sports and energy drinks. It has ownership interests in numerous bottling and canning operations. Coca- Cola sells finished beverage products bearing the Coca-Cola trademarks in more than 200 countries. As December 31, 2006, Coca-Cola operated through eight segments: Africa; East, South Asia and Pacific Rim; European Union; Latin America; North America; North Asia, Eurasia and Middle East; The activities of Coca-Cola straddle all sectors of the soft drink industry: in worldwide trade in 2004 it led in volume and value the carbonates, fruit juice and Ready to Drink (RTD), coffee sectors. It was the second leading player in the world in functional drinks and Asian specialty drinks. It was number three in bottled water. With regard to concentrates, Coca-Cola held second place in volume and ranked third in the world in value terms. In RTD tea, Coca-Cola ranked number one in value and number three in volume terms.

Financial Performance:
Coca- Coca-Cola grew turnover by approximately 4 percent in 2006. In the same year it reached nearly US$24 billion. The company generated 73 percent of the revenue from locations outside the company's domestic US market. The shift towards foreign markets as a financial concern is likely to continue. Recent growth has been chiefly in the form of brand extensions and an everexpanding distribution network. However, at a global level, stagnation in carbonates has affected volume growth for Coca-Cola. Volume growth in terms of cases grew by only 2 percent in 2006, and remained stagnant in the key North American and Europe, Eurasia and Middle East markets. This slow down in carbonates has impacted some investors' perception of the future financial growth potential of the firm.

Geographic Coverage
The geographic coverage of Coca-Cola is the best in the world - it is hard to think of a brand that has achieved such massive levels of penetration and recognition in North America, European Union, Africa, Latin America, North Asia, Eurasia and Middle East. International operations contributed 73 percent of 2006's sales and74 percent of operating income in 2006.

Organizational Structure
In 2001, Coca-Cola restructured its geographical operating segments and renamed them at the same time. North America (including The Minute Maid Company) now includes Puerto Rico, added from Latin America. Europe and Eurasia changed their names to Europe, Eurasia & Middle East. At the same time, Africa & Middle East, excluding the reclassified Middle East segment, changed their names to Africa. During the first quarter of 2001, Asia Pacific was renamed Asia. In 2002, Egypt was reclassified from Europe, Eurasia & Middle East to Africa. In 2004, Coca-Cola reclassified certain departments from the North American operating segment to the corporate operating segment. In March 2007, Coca-Cola reorganized its North American business to better reflect its strategic focus, creating three new business units for its sodas and other beverages. In a note to employees, Coke North America President Sandy Douglas said the new operating model would enable Coca-Cola "to transform our business and win in the marketplace." The three business units --sparkling beverages, still beverages and emerging brands will define Coca-Cola's focus in the North American market, where it faces stiff competition from rival PepsiCo Inc and makers of healthier beverages such as juices. Coca-Cola, alongside its subsidiary, Coca-Cola Hellenic Bottling Company, agreed to a deal with Russia's Multon juice company. Multon owns local Rich, Nico and Dobry brands. It is a market leader in the Russian fruit/vegetable juice category with a 22.9 percent volume share in 2004. In March 2007, Coca-Cola acquired all Fuze Beverage brands, including the Vitalize, Refresh, Tea and Slenderize lines for an undisclosed price. The restructuring and realignment of CocaCola in recent years has slightly reduced the company's heavy reliance on carbonates, although

these still account for some 83 percent of global volume. At the same time the acquisitions provide dominant positions in faster-growing beverage sectors such as bottled water, RTD tea and coffee and functional drinks.

Brands of Coca-Cola
Coca-Cola Zero has been one of the most successful product launches in Coca Colas history. In 2007, Coca Colas sold nearly 450 million cases globally. Put into perspective, that's roughly the same size as Coca Colas total business in the Philippines, one of our top 15 markets. As of September 2008, Coca-Cola Zero is available in more than 100 countries.

Energy Drinks
For those with high intensity approach to life Coca Cola brands of energy drinks Contain Ingredients such as ginseng extract, guarana extract, caffeine And B vitamins .

Juices/Juice Drinks
Coca Colas bring more than 20 juice and juice Drink brands, offering both adults and children nutritious, refreshing and flavorful beverages.

Soft Drinks
Coca Colas dozens of soft drink brands provide flavor and refreshment in a variety of choices. From the original Coca-Cola to most recent introductions, soft drinks from The Coca-Cola Company are both icons and innovators in the beverage industry.

Sports Drinks
Carbohydrates, fluids, and electrolytes team together in Coca Colas Sports Drinks, providing rapid hydration and terrific taste for fitness-seekers at any level

Tea and Coffee

Bottled and canned teas and coffees provide consumers' favorite drinks in convenient take-anywhere packaging, satisfying both traditional tea drinkers and today's growing coffee culture.

Water
Smooth and essential, our Waters and Water Beverages offer hydration in its purest form. Other Drinks So much more than soft drinks. Coca Colas brands also include milk products, soup, and more so you can choose a Coca Cola Company product anytime, anywhere for nutrition, refreshment or other needs.

Strategic Issues
Coca-Cola faces several significant strategic issues. Three primary strategic issues are of importance. The first is the declining sales in the carbonated soft drink sector. The second is the current health and wellness trend sweeping across the beverage industry. The third issue is the threat of increased competition from PepsiCo. The other strategic issues the company faces include increasing conflict with the bottlers, lack of innovation and food safety and statutory regulatory compliance.

Different Players in the Soft Drink Market

PEPSI Caleb Brandhum, a North Caroline Pharmacist, structure Pepsi Cola in the 1890s as cure of Dyspepsia (indigestion). In 1902, Bradhum applied for a trade mark, issued ninety seven share of stock and began selling Pepsi syrup in earnest. In his first year of business he spend $1900 on advertising a huge sum that he sold only 8000 gallons of syrup. In 1905 Bradhum built Pepsis bottling plant. By 1907 he was selling 10,000 gallons a year, two years later; he hired a New York advertising agency. After passing through many troubles for some period now Pepsi is a market leader in internationally and is available in 187 Nations throughout the world.

Cadbury Schweppes PLC

Cadbury Schweppes are joined force of Cadbury found in 1824 of U.K. and Schweppes of Ireland founded in 1783. Cadbury Schweppes is unified bussing which manages the relations his with over 240 franchised bottling operation on Zambia and Zimbabwe. Cadbury Schweppes has fottlery and partnership operations in 14 countries around the world.

Porter's Five Force analysis

One of the earliest models used to examine industry economics and industry attractiveness is Michael Porter's Five Force Model (Porter, 1980). Porter suggests five forces that determine industry profitability: Threat of new entrants-Low New entrants to the industry are not a strong competitive pressure in the soft drink industry. Coca-Cola and PepsiCo dominate with their strong brand name and superior distribution channels. In addition, the soft-drink industry is fully saturated. New growth is small. This makes it very difficult for new, unknown entrants to start competing against the existing established firms. Another barrier to entry is the high fixed costs for warehouses, trucks, and labour and economies of scale. New entrants cannot compete on price without economies of scale. These high capital requirements and market saturation make it extremely difficult for companies to enter the soft drink industry; therefore new entrants are not a strong competitive force. Threat of Substitutes-Very Strong Substitutes for Coca-Cola products are bottled water, sports drinks, coffee, and tea. Bottled water and sports drinks are increasingly popular with the trend towards the health conscious consumer. This trend is epitomized in the beverage consumption pattern of the ageing baby boomers.

There are a growing number and varieties of water and sports drinks that appeal to different consumers' tastes. These are advertised as healthier than soft drinks. In addition, coffee and tea are competitive substitutes because they provide caffeine. Soft drinks can be substituted with coffee. Specialty blend coffees are also becoming more popular with the increasing number of Starbucks stores that offer many different flavors to appeal to all consumer markets. Low switching costs for the consumer makes the threat of substitute products very strong Threat of Suppliers-Strong Suppliers to Coca-Cola are bottling equipment manufacturers and secondary packaging suppliers. Although Coca-Cola does not do any bottling, the company owns about 36 percent of Coca-Cola Enterprises. The rest of the Coca-Cola Enterprises is a publicly traded company. This is the largest bottler in the world (The Coca Cola Company 2006). Since Coca-Cola owns the majority of the bottler, it looks like that particular supplier does not hold much bargaining power. However, there has been increased concern about the simmering tensions between Coca-Cola and its increasing powerful independent bottlers such as Coca-Cola Enterprises. Coca-Cola Enterprises controls 80 percent of the US market as well as parts of Europe. Coca-Cola is introducing new product at a significant rate. The operational and distributional complexity due to new product introduction is affecting the bottom line of the bottlers. Some bottlers have even refused to carry new products. The conflict with the bottlers can be a major threat to Coca-Cola. In terms of equipment manufacturers, the suppliers are generally providing the same products. The number of equipment suppliers is not in short supply, so it is fairly easy for a company to switch suppliers. This takes away much of the suppliers' bargaining power. However, rising sugar and packaging material prices have a direct impact on the profitability of the Coca-Cola's products. Bargaining power of Buyers-High The buyers of Coca-Cola and other soft drinks are mainly large grocers, discount stores, and restaurants. The soft drink companies distribute the beverages to these stores for resale to the consumer. The bargaining power of the buyers is very evident and strong. Large grocers and discount stores buy large volumes of the soft drinks, allowing them to buy at lower prices. Restaurants have less bargaining power because they do not order in large volume. However, with the number of people drinking less soft drink, the bargaining power of buyers could start increasing due to decreasing buyer demand. The interesting shift in buyer demand because of increased demand for healthy choices has driven the market share of substitute drinks. Consumers are focusing more on healthy choices and buying healthy drinks from "high endspeciality stores. This phenomenon is due to health and wellness trend sweeping across the global beverage market. Soft drink consumers are moving their consumption from regular cola carbonates to low-calorie carbonates, bottled water, sport drinks, juice and teas. Coca-Cola should adapt to this consumer behaviour for future growth.

Competitive rivalry-High The competitive pressure from rival sellers is the greatest competition that Coca-Cola faces in the soft drink industry. Coca-Cola, PepsiCo., and Cadbury Schweppes are the largest competitors in this industry with global presence. Though Coca-Cola owns four of the top five soft drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite), it had lower sales in 2006 than did PepsiCo. However, Coca-Cola has higher sales in the global market than PepsiCo. In 2006, PepsiCo dominated North America with sales of $22 billion, whereas Coca-Cola only had about $7 billion, with more of their sales coming from overseas. PepsiCo is the main competitor for Coca-Cola and these two brands have been in a power struggle for more than a century. Brand name loyalty is another competitive pressure. The Brand Keys' Customer Loyalty Leaders Survey (Brand Loyalty, 2006) shows the brands with the greatest customer loyalty in all industries. Diet Pepsi ranked 18th and Diet Coke ranked 47th as having the most loyal customers to their brands The overall KSF identified for the competitive rivalry are size, global presence and brand image. Porter's Five Forces Model identifies the five forces of competition for any company. The recognition of the strength of these forces helps to see where Coca-Cola stands in the industry. Of the five forces, rivalry within the soft drink industry, especially from PepsiCo, is the greatest source of competition for CocaCola. Key success factors size, price, brand image, distribution and global presence. quality and innovation. size and global presence.

Emerging trends in the soft drink industry-Industry Analysis

Merger & acquisition The soft drink industry is a mature industry that will lead to change. The entrylexit of major firms is a trend in the industry that will also likely lead to change. More specifically, merger and consolidation have been prevalent in the soft drinks market. Several leading companies have been looking to drive revenue growth and improve market share through the increased economies of scale found through mergers and acquisitions. One specific example is how PepsiCo acquired Quaker Oats, who in turn bought Gatorade. That will help expand PepsiCo's energy drink sector (Datamonitor, 2005). This is a great opportunity Coca-Cola missed as the first-mover in the energy drink sector. 2.2.2 Globalization With the growing use of the Internet and other electronic technologies, global communication is rapidly increasing. This is allowing firms to collaborate within the country market and expand into world markets. It has driven

competition greatly as companies strive to be first-movers. Specifically, the global soft drink market's compound annual growth rate (CAGR) is expected to expand to 3.6 percent from 2004 to 2009 (Datamonitor, 2005). 2.2.3 Lifestyle Changing societal concerns, attitudes, and lifestyles are important trends. In the United States and Europe, people are becoming more concerned with a healthy lifestyle. "Consumer awareness of health problems arising from obesity and inactive lifestyles represent a serious risk to the carbonated drinks sector" (Datamonitor, 2005). The trend is causing change. Coca-Cola is differentiating its products in order to increase sales in a stagnant market. 2.2.4 Long-term industry growth rate Since 2000, the CAGR is 1.5 per cent (Datamonitor, 2005). The low growth rates are of concern for soft drink companies, and Coca-Cola is creating new strategies to combat the low rates. 2.2.5 Buyer preferences Because soft drinks have been around since as early as 1798 (American Beverage Association, 2005), buyers want innovation with the products they buy. The key for Coca-Cola's success is differentiation. 2.2.6 Innovation Product innovation is necessary to combat buyer's search and desire for a variety of beverage varieties. Coca-Cola is already differentiating by taste. Recent additions to Coca-Cola's product portfolio include regular Coke Zero, C2, Fresca, Diet Cherry Coke, Cherry Coke, Vanilla Coke, Coca-Cola with Lime, Coca-Cola with lemon and many more.

Summary of Key Success Factors (KSF)

Key factors for competitive success within the soft drink industry derived from the Porter's five force analysis and industry analysis are as follows: 2.3.1 Product Innovation Primarily, constant product innovation is imperative. Coca-Cola must be able to recognize consumer wants and needs, while maintaining the ability to adjust with the changing market. Coca-Cola must keep up with the changing trends. 2.3.2 Size Large distributors have the ability to negotiate with stadiums, universities and school systems, making them the exclusive supplier for a specified period of time. Additionally, they have the ability to commit to mass purchases that significantly lower their costs. Coca-Cola must implement effective distribution channels to remain competitive. 2.3.3 Quality Quality of the product is also a key factor for success. In technical usage, quality can have two meanings: 1. The characteristics of a product or service that bear on its ability to satisfy stated or implied needs. 2. A product or service free of deficiencies. The Coca-Cola Quality System is a worldwide initiative involving every

aspect of the business. Everyone who works for or with Coca-Cola is empowered and expected to maintain the highest standards of quality in products, processes and relationships 2.3.4 Brand Image Established brand loyalty is a large aspect of the soft drink industry. Many consumers of carbonated beverages are extremely dedicated to a particular product, and rarely purchase other varieties. This stresses the importance of developing and maintaining a superior brand image. 2.3.5 Price Price is also a key factor because consumers without a strong brand preference will select the product with the most competitive price. 2.3.6 Global Presence Global presence through expansion is a vital factor in the success of a company within the soft drink industry. The United States has reached relative market saturation, requiring movement into the global industry to maintain growth (Datamonitor, 2005). 2.3.6 Distribution Superior distribution channel is a key success factor because it enables the company to move the products from the manufacturer to the consumer efficiently. 2.3.6 Healthy Choices (Product Differentiation) Healthy choices or product differentiation will be a source of competitive advantage for a beverage manufacturer. Coca-Cola should produce beverage that has unique and valuable characteristics for certain market segment like health conscious consumers. SWOT ANALYSIS SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats inside a company, project, or a business venture. It involves identifying the internal and external factors that are favorable/unfavorable for business to succeed SWOT ANALYSIS FOR COCA COLA COMPANY STRENGTHS 1. Brand equity/image & recognition 2. Product distribution and worldwide network 3. Solid financial performance 4. One of the world's most recognized brand. 5. Product diversification (water, juices, soft drinks, sport drinks, etc) 6. Co-operate identity. 7. Innovation WEAKNESSES 1. Credit rating 2. Customer concentration, particularly in the US (Wal-Mart accounts for more than 10% of Coca Cola's business in the US) 3. A lot of loyal Pepsi customers are not enough loyal Coca Cola customers

4. Does not enjoy the number one position in India, Pakistan. OPPURTUNITIES 1. Possible growing demand. 2. Expansion Reaching all segments. 3. Globalization 4. Catering to Health Consciousness of People 5. Bottled water growth 6. Acquisitions of smaller players. THREATS 1. Health Drinks Fruit Juice Companies 2. Key competitors (Pepsi, etc) 3. Commodity prices growth 4. Image perception in certain parts of the world. 5. Smaller, more nimble operators/players KEY INTERNAL FACTORS Weight Rating weight Score Strengths Average customer purchases increased by 18.54% 0.11 2 0.22 Employee moral 0.05 3 0.15 Technical support and research efficiency 0.08 1 0.08 Newspaper advertisement expenditures increased 0.09 4 0.36 Revenues from other segments 0.14 4 0.56 Debt to total asset ratio decline 0.05 2 0.10 Locations in the world 0.15 4 0.20 Weaknesses Inventory turnover decreased by 13.29% 0.10 3 0.30 Return on equity down decreased 80.11 1 0.11 Website 0.04 2 0.08 Supplier time delivery 0.08 1 0.08 Total 1.00 2.24 Ranked 1 to 4. Low to High respectively. Current Evaluation: 2.24 Less than average of 2.50 Need efficiency in the Management, Marketing, finance, MIS, R & D, and other operations..
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18- KEY EXTERNAL FACTOR

S. No. Factor Weight Rate Score

Opportunities
1 Entering into snacks business (Pepsi earns 60% from snacks) 0.100 3.50 0.35 2 Expansion by taking over Cadbury division or product line 0.050 4.00 0.20 3 Expansion by introducing new ready-to-drink products (tea, coffee, etc.) 0.050 4.00 0.20 4 Entering into or introducing new sports events (e.g. Formula I) to

introduce energy drinks 0.025 3.50 0.09 5 Strong financial and assets support available worldwide to take financing for expansion 0.015 1.50 0.02 6 Introduce soft drink with focus of "healthy soft drink" - eliminate obesity concept 0.075 3.50 0.26 7 Diversification of bottling business to other industries like pharmaceuticals 0.050 2.50 0.13 8 Link with computer internet/network/cell gaming business to focus on youth worldwide - to take advantage of technology 0.025 2.50 0.06 9 0.025 3.00 0.08 10 0.015 3.00 0.05 Opportunities - Total 0.430 1.43 11 Hurting products containing sugar & sugar-substitute based drinks (trend towards more healthy eating & drinking) 0.100 4.00 0.40 12 Increase in raw material costs 0.075 3.50 0.26 13 Government policies may hurdle in expansion 0.075 4.00 0.30 14 Government policies - for disclosure of health warning 0.100 4.00 15 Ban in public schools due to obesity issues 0.075 3.50 16 Lack in snacks business 0.075 3.50 0.26 17 Lack of share in homeland market (refer Exhibit 8) - room for other brands 0.015 2.00 0.03 18 Availability of purified water (being main component) in different parts of the world 0.025 3.50 0.09 19 Competitor may access unreached parts of the world prior to Coca Cola 0.015 3.50 0.05 20 Salesman not equipped with sales ordering devices 0.015 2.00 0.03 Threats - Total 0.570 1.43 Grand Total 1.000 2.86

32 Tows

The three main ways are through innovation, relations or reputation. First of all innovation can be used. This may certainly give coca cola competitive advantage because it introduces a new product, which many people will want to try. People will like to purchase the commodity even though price is high because no substitutes are available. It may also give coca cola brand loyalty which means customers will stay loyal to them no matter what happens.(S1,S2,S4,S5,S7,T1,T2,T3) Another factor is marketing. This is a very important factor for coca cola. In order for the company to maintain its strong market position, Coca Cola needs to continuously strengthen its brand to maintain brand loyalty and positive responses and differentiate itself from its competitors.(W2,W3,W4,O1,O2,O3,O4) If coca cola used strong marketing with environment friendly attitude it may raise barriers to entry, thus decreasing the threat of new entrants to the industry. (T1,T4,T5,S2,S4,S5,S6)

Coca Cola's brand represents quality, taste and excitement to the market, qualities that remain unmatched by the company's competitors, thus severely reducing any threat of being substituted. (S1,S4,S2,O1,O2,O3) Reason of not being popular in India is the mis-utilization of rear water resources. This put negative effect on the brand image, because of cola plant water level in the area decreases which makes the resident life miserable. If Cola Company wants a number one position in India they have to follow following criteria Environmental due diligence before acquiring land or starting projects Environmental impact assessment before commencing operations Ground water and environmental surveys before selecting sites Compliance with all regulatory environmental requirements Ban on purchasing CFC-containing refrigeration equipment Waste water treatment facilities with trained personnel at all company-owned bottling operations Energy conservation programs They should installed hi-tech water recycling system so that they can save 50% water savings of its operations. (W3, W4, T4)
35 Managerial Policy

Many of coca colas plastic bottles are recycled and as a result less resources are lost and costs decrease. Through diversification & innovation in water & juices business supported with aggressive advertising strategy Coca Cola Company can attracts a new market segment. This will mean they will have a higher revenue increasing long term profitability and improve credit rating.(W1,W4,T1,T3,T4)
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SPACE MATRIX STRATEGIC MANAGEMENT METHOD The SPACE matrix is a management tool used to analyze a company. It is used to determine what type of a strategy a company should undertake. The Strategic Position & ACtion Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization. The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG matrix model, industry analysis, or assessing strategic alternatives (IE matrix). The SPACE matrix calculates the importance of each of these dimensions and places them on a Cartesian graph with X and Y coordinates. The following are a few model technical assumptions: - By definition, the CA and IS values in the SPACE matrix are plotted on the X axis. -CA values can range from -1 to -6. - IS values can take +1 to +6. -The FS and ES dimensions of the model are plotted on the Y axis. - ES values can be between -1 and -6.

- FS values range from +1 to +6. Internal Strength Position External Strength Position Competitive Advantage Industry Strength (Worst -6,Best -1) (Worst +1,Best +6) Product Quality -1 Barriers to entry 5 Axis x Market Share -1 Growth Potential 5 Brand & Image -1 Access to Financing 4 Product Life Cycle -2 Consolidation 5 Average Score =-1.25 Average Score =4.75 Total X-Axis score: 3.5 Financial Strength Environment Strength (Worst +6,Best +1) (Worst -6,Best -1) ROA 5 Inflation -2.5 Axis Y Leverage 4.5 Technology -1 Liquidity 5 Demand Elasticity -2.5 Cash Flow 4.5 Taxation -4 Average Score =4.75 Average Score =-2.5 Total Y-Axis score: 2.25